International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Auditing And Assurance Services In Australia 6th Edition Louwers Solutions Ma...qixoxyzu
Full download : https://alibabadownload.com/product/auditing-and-assurance-services-in-australia-6th-edition-louwers-solutions-manual/
Auditing And Assurance Services In Australia 6th Edition Louwers Solutions Manual
THE IMPACT OF THE AUDIT QUALITY ON THAT OF THE ACCOUNTING PROFITS: THE CASE O...ijmvsc
The purpose of this article is to examine the impact of the audit quality on that of the accounting profits. We chose the accrual quality, the accounting conservatism and the profit relevance as a measure of the quality of the accounting profits. The empirical study, which was carried out in this article on a sample of Tunisian firms listed on the TSE for the period (2005-2009), confirms the significant impact of the audit quality on that of the accounting profits. The study results also show that the variables: size of the audit firm, sector-based specialization of the audit firm, the co-commissioner and the size of the audit committee, improve the quality of the accounting profits.
International Journal of Business and Management Invention (IJBMI) inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Auditing And Assurance Services In Australia 6th Edition Louwers Solutions Ma...qixoxyzu
Full download : https://alibabadownload.com/product/auditing-and-assurance-services-in-australia-6th-edition-louwers-solutions-manual/
Auditing And Assurance Services In Australia 6th Edition Louwers Solutions Manual
THE IMPACT OF THE AUDIT QUALITY ON THAT OF THE ACCOUNTING PROFITS: THE CASE O...ijmvsc
The purpose of this article is to examine the impact of the audit quality on that of the accounting profits. We chose the accrual quality, the accounting conservatism and the profit relevance as a measure of the quality of the accounting profits. The empirical study, which was carried out in this article on a sample of Tunisian firms listed on the TSE for the period (2005-2009), confirms the significant impact of the audit quality on that of the accounting profits. The study results also show that the variables: size of the audit firm, sector-based specialization of the audit firm, the co-commissioner and the size of the audit committee, improve the quality of the accounting profits.
International Journal of Business and Management Invention (IJBMI) inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
1 2Cheat Sheet on Evidence and DocumentationACC491J.docxhoney725342
1
2
Cheat Sheet on Evidence and DocumentationACC/491
July 3, 2017Cheat Sheet on Evidence and Documentation
Relevance, Reliability and Sufficiency of Evidence
The basic property of an audit report is that it should entail relevance. The report t should be written in a standard format which is usually mandated by generally accepting the set auditing standards. Accounting is an important task since it ensures financial details of a business are kept considerably clean. Going through the terminologies in order to know everything that is involved in auditing is important when auditing the financial records. The first step involves dividing the field into the foremost part known as the financial statement. Soares (1997). All businesses hold their financial statements in high regards since it is a legal requirement to provide and they provide them when they are requested by relevant bodies. These statements represent the picture of the business in reference to its financial robustness. The audited report reports are used to verify that the details given in their statements. For instance, the public corporations are supposed to ensure that their statements are professionally audited in order to secure their investors’ wealth.
It is important to note that the concept of reliability is of real interest to a wide variety of audit participants. This is due to many quotations and references that are required for well-founded financial information and the role of audit. It has been said that having a genuine financial and economic data should be the principle assumptions of a society. Being reliable increases confidence in and reliance on financial statements. Some of the aspects of reliability include faithful representation, fitness for purpose, robustness as well as the audit firm reliability.
The quantity of audit evidence is in simple words what sufficiency of audit evidence means. The risk of material and the inclusive quality of the evidence presented is what needs to be considered to fulfill the sufficiency needed. One should rely on an eloquent order other than the convincing one. Yang (2007). Impressive evidence shows the scale one way or the other and provides one with a basis beyond a sensible doubt for forming a viewpoint (Loughran, Maire, 2011). Convincing evidence is one which is perfectly reliable. It involves looking for all clients' records in order to achieve this level of assertion. Careful documentation of the work and the audit opinion must be fact-based and should be retractable so that a different review of the audit should depict the same conclusion (Loughran, Maire, 2011).
Confidentiality: Financial statements should be handled with confidentiality. Confidential information should not be disclosed to anyone. The accountant must protect the information from unauthorized disclosure or public release. The auditor should be accountable for any access by unauthorized people. In most times, clients see the auditors as trusted ...
AUDITOR’S FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
The research intensifies effort at determining whether auditor’s independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
The main objective of this research is to examine the relationship between audit failures’ and internal control over a company’s performance. The research uses method of a quantitative method via questionnaire 22 auditors usable data based on State Audit Institution in Oman. The hypotheses of the current research used its variables via using Smart-PLS statistical instruments. The findings indicated revealed that a positive and significant relationship between Internal control on Performance. As well as, the findings revealed that the audit failures have an insignificant influence on performance in public companies in Oman
BUSN20016 Project Proposal
BUSN20016 Project Proposal
RESEARCH IN BUSINESS- BUSN20016, Term-1, 2018
ASSESSMENT- 3
Project Title: Factors Affecting Quality of Audit Reports in Australian Commercial Banks
NAME OF THE STUDENT:
Student ID :
Tutor’s name :
Course Lecturer :
Campus : Central Queensland University, Sydney Campus
ASSESSMENT SHEET
Criteria
Total Marks
Marks Obtained
Overall Comments
A statement of the problem, research aim, objectives and research questions
Justification and potential output of the research
Conceptual framework
Methodology, organization of the study, project budget and schedule
Accurate referencing, use of correct English and logical sequences between sentences and paragraphs and a good introduction
10
10
10
10
10
Total
50
Mark reduction for Turnitin similarity (It's up to the markers and unit coordinator's judgment)
Mark reduction for late submission(5% mark reduction for each day of late submission)
Grand Total= 50
Key to grading and corresponding marking scale:
HD (42.5 and above out of 50 marks): Student demonstrates outstanding understanding and interpretation of all aspects of the criteria.
D (37.25 to 42.24 out of 50 marks): Student demonstrates excellence in understanding and interpretation of almost all aspects of the criteria with some minor corrections or additions needed.
C (32.25 to 37.24 marks out of 50 marks): Student demonstrates very good understanding and interpretation of most aspects of the criteria with some need for additional work, additions or improvement.
P (24.75% to 32.24% marks): Student demonstrates good understanding and interpretation of the criteria to warrant the award of a Pass but requires considerable additional work, additions or improvement.
F (below 24.7%): Student demonstrates an unsatisfactory understanding and interpretation of the criteria and requires major additional work, additions or improvement to achieve a passing grade.
June, 2018
Contents
Introduction 3
Statement of the Problem 4
Research Objectives/Questions 4
Justification of the Project 5
Expected Research output/Outcome 5
Conceptual Framework 7
Hypothesis Testing: 8
Research Methodology 8
Qualitative data Analysis: 9
Data Series and Survey/ Interview Questionnaire: 9
Sampling Design and Data Analysis: 9
Research Variables: 9
Organization of the Study 10
GANTT CHART 10
Project Budget and Budget Justification 11
References 12
Appendix 14
Introduction
Financial Statements are relevant and potential factors to change management decisions including manager’s day to day operational decisions. Truthful decision and guidance of management demotes information asymmetry and meliorates the reputation of firm for transparent and credible reporting (Mei, Chan, & McVay, 2009). Auditors articulate a judgment to ensure fairness of financial statements. Acquiring assurance f.
Relationship of Statutory Auditors Competence and Independenc.docxaudeleypearl
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position ...
Relationship of Statutory Auditors Competence and Independenc.docxcarlt4
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position .
External Auditors Independence on Accounting Quality of Nigerian Manufacturin...ijtsrd
This study examines the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies. Specifically, the study ascertain the effect of audit fees on discretionary accruals of manufacturing companies and determine the effect of audit firm tenure on discretionary accruals of manufacturing companies. Ex post facto research design was adopted. The population of the study comprise of Consumer Goods manufacturing companies on the Nigerian Stock Exchange NSE . Ordinary Least Square was used to test the relationship between the independent variables and the dependent variable. The empirical results revealed that the study determined the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies that there is a significant positive effect of audit firm tenure on discretionary accruals of Nigerian manufacturing companies. Also that audit fees has a non significant positive effect on discretionary accruals of Nigerian manufacturing companies. Auditors’ are responsible for certifying the true and fairness of financial statements. The present study investigates the effect of audit firm tenure, Audit fees, audit firm size, and degree of competition on the level of discretionary accruals as surrogate for accounting quality. The results showed mixed findings. Two proxies audit firm tenure and audit firm size showed a significant positive effect while, audit fees and degree of competition showed non significant positive effect. Based on the empirical results above, the study recommended that firms are advised to consider use of industry specialist auditors against the consideration of ‘name’ alone such like the use of Big 4. Ebubechukwu, Jacinta O | Ofurum, Darlington I "External Auditors Independence on Accounting Quality of Nigerian Manufacturing Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33021.pdf Paper Url :https://www.ijtsrd.com/management/accounting-and-finance/33021/external-auditors-independence-on-accounting-quality-of-nigerian-manufacturing-companies/ebubechukwu-jacinta-o
Keynote speakers SEC Commissioner Luis Aguilar and PCAOB Chairman James Doty set the tone for the conference by calling upon accountants, as financial statement preparers and auditors, to step up to their special responsibility to strengthen investor confidence in financial reporting and thereby help keep the markets trustworthy and safe for investors.
As a background for the discussions, Commissioner Aguilar cited studies showing startling declines in market statistics: Only 17% of Americans trust the stock market. Average daily trades in US stocks are only about half their 2008 peak. US initial public offerings of smaller companies have never fully recovered following the bursting of the technology bubble in 2000.
To restore the vitality of the markets, Commissioner Aguilar said, individual investors must have confidence that the markets are fair, the rules are enforced effectively, and the information available is meaningful, accurate and complete. There can be no doubt in the hearts and minds of investors about the reliability and integrity of the audited financial statements.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
1 2Cheat Sheet on Evidence and DocumentationACC491J.docxhoney725342
1
2
Cheat Sheet on Evidence and DocumentationACC/491
July 3, 2017Cheat Sheet on Evidence and Documentation
Relevance, Reliability and Sufficiency of Evidence
The basic property of an audit report is that it should entail relevance. The report t should be written in a standard format which is usually mandated by generally accepting the set auditing standards. Accounting is an important task since it ensures financial details of a business are kept considerably clean. Going through the terminologies in order to know everything that is involved in auditing is important when auditing the financial records. The first step involves dividing the field into the foremost part known as the financial statement. Soares (1997). All businesses hold their financial statements in high regards since it is a legal requirement to provide and they provide them when they are requested by relevant bodies. These statements represent the picture of the business in reference to its financial robustness. The audited report reports are used to verify that the details given in their statements. For instance, the public corporations are supposed to ensure that their statements are professionally audited in order to secure their investors’ wealth.
It is important to note that the concept of reliability is of real interest to a wide variety of audit participants. This is due to many quotations and references that are required for well-founded financial information and the role of audit. It has been said that having a genuine financial and economic data should be the principle assumptions of a society. Being reliable increases confidence in and reliance on financial statements. Some of the aspects of reliability include faithful representation, fitness for purpose, robustness as well as the audit firm reliability.
The quantity of audit evidence is in simple words what sufficiency of audit evidence means. The risk of material and the inclusive quality of the evidence presented is what needs to be considered to fulfill the sufficiency needed. One should rely on an eloquent order other than the convincing one. Yang (2007). Impressive evidence shows the scale one way or the other and provides one with a basis beyond a sensible doubt for forming a viewpoint (Loughran, Maire, 2011). Convincing evidence is one which is perfectly reliable. It involves looking for all clients' records in order to achieve this level of assertion. Careful documentation of the work and the audit opinion must be fact-based and should be retractable so that a different review of the audit should depict the same conclusion (Loughran, Maire, 2011).
Confidentiality: Financial statements should be handled with confidentiality. Confidential information should not be disclosed to anyone. The accountant must protect the information from unauthorized disclosure or public release. The auditor should be accountable for any access by unauthorized people. In most times, clients see the auditors as trusted ...
AUDITOR’S FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
The research intensifies effort at determining whether auditor’s independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
The main objective of this research is to examine the relationship between audit failures’ and internal control over a company’s performance. The research uses method of a quantitative method via questionnaire 22 auditors usable data based on State Audit Institution in Oman. The hypotheses of the current research used its variables via using Smart-PLS statistical instruments. The findings indicated revealed that a positive and significant relationship between Internal control on Performance. As well as, the findings revealed that the audit failures have an insignificant influence on performance in public companies in Oman
BUSN20016 Project Proposal
BUSN20016 Project Proposal
RESEARCH IN BUSINESS- BUSN20016, Term-1, 2018
ASSESSMENT- 3
Project Title: Factors Affecting Quality of Audit Reports in Australian Commercial Banks
NAME OF THE STUDENT:
Student ID :
Tutor’s name :
Course Lecturer :
Campus : Central Queensland University, Sydney Campus
ASSESSMENT SHEET
Criteria
Total Marks
Marks Obtained
Overall Comments
A statement of the problem, research aim, objectives and research questions
Justification and potential output of the research
Conceptual framework
Methodology, organization of the study, project budget and schedule
Accurate referencing, use of correct English and logical sequences between sentences and paragraphs and a good introduction
10
10
10
10
10
Total
50
Mark reduction for Turnitin similarity (It's up to the markers and unit coordinator's judgment)
Mark reduction for late submission(5% mark reduction for each day of late submission)
Grand Total= 50
Key to grading and corresponding marking scale:
HD (42.5 and above out of 50 marks): Student demonstrates outstanding understanding and interpretation of all aspects of the criteria.
D (37.25 to 42.24 out of 50 marks): Student demonstrates excellence in understanding and interpretation of almost all aspects of the criteria with some minor corrections or additions needed.
C (32.25 to 37.24 marks out of 50 marks): Student demonstrates very good understanding and interpretation of most aspects of the criteria with some need for additional work, additions or improvement.
P (24.75% to 32.24% marks): Student demonstrates good understanding and interpretation of the criteria to warrant the award of a Pass but requires considerable additional work, additions or improvement.
F (below 24.7%): Student demonstrates an unsatisfactory understanding and interpretation of the criteria and requires major additional work, additions or improvement to achieve a passing grade.
June, 2018
Contents
Introduction 3
Statement of the Problem 4
Research Objectives/Questions 4
Justification of the Project 5
Expected Research output/Outcome 5
Conceptual Framework 7
Hypothesis Testing: 8
Research Methodology 8
Qualitative data Analysis: 9
Data Series and Survey/ Interview Questionnaire: 9
Sampling Design and Data Analysis: 9
Research Variables: 9
Organization of the Study 10
GANTT CHART 10
Project Budget and Budget Justification 11
References 12
Appendix 14
Introduction
Financial Statements are relevant and potential factors to change management decisions including manager’s day to day operational decisions. Truthful decision and guidance of management demotes information asymmetry and meliorates the reputation of firm for transparent and credible reporting (Mei, Chan, & McVay, 2009). Auditors articulate a judgment to ensure fairness of financial statements. Acquiring assurance f.
Relationship of Statutory Auditors Competence and Independenc.docxaudeleypearl
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position ...
Relationship of Statutory Auditors Competence and Independenc.docxcarlt4
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
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1. International Journal of Business and Management Invention
ISSN (Online): 2319 – 8028, ISSN (Print): 2319 – 801X
www.ijbmi.org || Volume 3 || Issue 6 || June. 2014 || PP. 64-74
www.ijbmi.org 64 | Page
Effect of Competence and Auditor Independence on Audit
Quality with Audit Time Budget and Professional Commitment
as a Moderation Variable
Abdul Halim1
, Sutrisno T2
, Rosidi2
, M. Achsin2
1
Gajayana University Malang, Indonesia
2
Brawijaya University Malang, Indonesia
ABSTRACT: High audit quality shows that auditors can detect financial statements containing misstatements
material, and they can reduce the asymmetry information between principal and agent, and they can guarantee
the stakeholder’s interests. Regarding to this opinion, this study has three aims. First was to test effect of
auditors’ competence and independence on audit quality. Second was to test whether audit time budget could
moderate effect of auditors’ competence and independence on audit quality. Third was to test whether the
professional commitment moderate effect of auditor’s competence and independence on audit quality. Analysis
units of this study were 918 public accountants in Indonesia in 2012. Data were collected by sending
questionnaires. Samples of 278 were selected randomly. However, collected data were 178 ones. Analytical
technique used was Partial Least Square (PLS). Test results proved that first, auditor’s competence and
independence positively affect on audit quality. It means the higher auditor’s competence and independence, the
higher audit quality. Second, audit time budget weaken effect of auditor’s competence and independence on
audit quality. It means the smaller audit time budget, the greater effect of auditor’s competence and
independence on audit quality. Third, professional commitment strengthens effect of auditor’s competence and
independence on audit quality. It means the stronger professional commitment, the higher effect of auditor's
competence and independence on audit quality.
KEYWORDS: audit quality, auditor’s competence, auditor’s independence, audit time budget, professional
commitment.
I. INTRODUCTION
Reliability and accuracy of financial information presentation and disclosure are important to get
investors confidence at capital market. Investor confidence to financial statements issuer can be increased when
audited by competent and independent public accountants. Public accountants always maintain audit quality
based on Public Accountants Professional Standards and Code of Professional Ethics of Certified Public
Accountants for survival of its clients, investors of audited company, and Public Accounting Firm itself.
However, in reality it is not happened.
Some example in Indonesia that coming to surface related to "cooking" financial statements issues are
PT Kimia Farma and PT Bank Lippo. PT Kimia Farma reported a profit of Rp 132 billion. In fact, it make a
profit of Rp 99 billion. Meanwhile, PT Bank Lippo publicly reported Rp 98 billion profit. However, in few next
months the financial statements submitted to Jakarta Stock Exchange stated that company loss Rp 1.3 trillion
(Gumanti, 2003). This action makes hundreds of audited financial statements quality become "questionable"
(Soeratin, 2010).
These issues are a symptom of problem that generated from low quality by public accountants. It
potentially creates uncertainty in quality and reliability of information presented in audited financial statements.
Therefore, it is considered important to conduct this study to explore variables affecting audit quality.
Associated with audit quality, DeAngelo (1981) proved that audit quality is determined by two factors, namely
auditor competence in finding a client breach in accounting system and auditor independence to report findings.
Audit quality of DeAngelo (1981) has been re-examined by several researchers, among them Schroeder et al.
(1986), Deis and Giroux (1992), Carcello et al. (1992), Sutton (1993), Behn et al. (1997), Moizer (1998),
Warming and Jensen (2001), Duff (2004), Jaffar et al. (2005), Baotham and Ussahawanitchakit (2009), and
Alexander et al. (2010).
These researchers’ results show a significance conflict. Therefore, audit time budget and professional
commitment is included as moderation variable the effect of competence and independence of auditors on audit
quality. Including audit time budget and professional commitment as a moderation variable is to known whether
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audit time budgets and professional commitment can strengthen or weaken effect of competence and
independence of auditors on audit quality?
Audit time budget in this study is included as a moderation variable the effect of competence and
independence of auditors on audit quality based on emotion theory of James (1950) and Lange (1922) in King
(2007), which states that emotions are result of a person's perception in response to various stimuli from outside.
Meanwhile, professional commitment in this study is included as a moderation variable the effect of competence
and independence of auditors on audit quality based on attitude theory of Allport (1935) in Anwar (1995:5),
which states that attitude is potential predisposition to respond in a certain way when individuals are faced a
stimulus that requires a response (either positive or negative). Furthermore, it is explained that gesture contains
three components: cognitive, affective, and conative.
Based on above description, this study aims are: (a) examining and explaining effect of auditors
competence on audit quality ; (b) examining and explaining effect of auditor independence on audit quality ; (c)
examining and explaining whether audit time budget moderate the effect of auditors competence on audit
quality ; (d) examining and explaining whether audit time budget moderate effect of auditor independence on
audit quality ; (e) examining and explaining whether professional commitment moderate effect of auditors
competence on audit quality ; (f) examining and explaining whether professional commitment moderate effect
of auditor independence on audit quality ;
Theoretical contribution of this study are : first, giving a better understanding on audit quality from
DeAngelo (1981) to include a time budget and audit professional commitment as a moderation variable the
effect auditor competence and independence on audit quality. Second, developing a theoretical framework to
treat audit quality as a construct of several variables, namely competence, independence, audit time budget, and
professional commitment that better defined through empirical indicators. Practical contribution of this research
is to provide guidance for CPAs or Public Accounting Firm to improve audit quality by considering determinant
variables, namely: auditor’s competence, auditor’s independence, audit time budget, and professional
commitment with their indicators.
II. THEORY REVIEW, CONCEPTUAL FRAMEWORK AND HYPOTHESIS
DEVELOPMENT
2.1 Theory Review
2.1.1 Quality Audit
DeAngelo (1981) said that audit quality is probability combination of competent auditors to found
violations in client's accounting system and to report their findings independently. Audit quality is measured by
two formative indicators, namely : (a) auditor's reputation where MacMillan et al. (2004) showed that reputation
is public perceptions about auditor past performance regarding to audit quality and standards of professional
conduct that are consistent in auditing process and (b) industry specialist auditors where Mayhew and Wilkins
(2003) stated that auditors are that often assigned to specific industries become very adept to identify and
addressing the problems of specific industry audit, resulting in a high quality audit.
2.1.2 Competence
Lasmahadi (2002) stated that competence is personal attributes of a person which enables to achieve
superior performance. Auditor competence was measured with four formative indicators, namely : (a) planning,
where Dikolli (2004) stated that existence of a good audit planning makes auditor will potentially have
competence to find material misstatements and in audit planning should consider client 's internal control
system, audit risk, and substantive testing procedures ; (b) knowledge, where Tan and Libby (1997) stated that
knowledge is one determinants of technical competence and very useful in auditors tasks structured; (c)
experience, where Colbert (1989) stated that an experienced auditor will makes judgment with a lower error rate
than inexperienced auditors so effecting competence ; and (d) supervision, where Malone and Roberts (1996)
stated that strong supervision will prevent auditor possibility to act that reduce audit quality and supervised audit
processes tends to produce a correct disclosure and higher audit quality.
2.1.3 Independence
Sridharan et al. (2002) stated that auditor's independence is a not bias mental attitude to make decision
in all audit and reporting. Auditor independence was measured with four formative indicators, namely : (a) audit
market competition, where Beattie et al. (1999) said that audit market competition is reflected by high
competitive prices that affect to reduce number of qualified personnel resources, so the risk to decline
competence and independence of auditor ; (b) economic dependence, where Deis and Giroux (1992) stated that
under high economic conditions the dependence can be used by client to oppress auditor by auditors change.
This can make auditor will not be able to avoid client pressures, thus causing them to weaken independence ; (c)
non-audit services, where Ashbaugh (2004) stated that high presence of non-audit services will create high
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economic bond between auditor and client, so it can cause a loss of auditor independence ; and (d) auditor
assignment period where Dye (1991) stated that existence of long-term assignment potentially can undermine
auditor independence, because it can foster closeness between management and auditors.
2.1.4 Audit Time Budget
DeZoort (1998) stated that audit time budget is firm budget time because of limited resources allocated
to implement auditing. Audit time budget is measured with two reflective indicators, namely (a) time budget,
where DeZoort (1998) relate budget time budget to control the amount of time for an overall audit work; and (b)
time limit, where DeZoort (1998) relate time limit to budget deadline to complete any audit work at date/time
specified.
2.1.5 Professional Commitment
Aranya and Ferris (1984) stated that professional commitment is a person's love and courage to carry
duties is charged based on rules and norms within profession. Professional commitment is measured by three
reflective indicators of Hall et al. (2005), namely : (a) normative professional commitments regarding to
auditors feelings must remain in profession, because he felt an obligation or duty rightly made on benefit
provided by a professional organization ; (b) continuous professional commitments regarding to auditor
awareness should be in profession, because of costs or losses to be borne by auditors (eg financial loss) in
connection in losing of auditor's professional organization ; and (c) affective professional commitment regarding
to desire to want to be in a profession, because auditor was having an emotional bond or have the same values
with profession organization.
2.2 Conceptual Framework
Based on theory review above, it can be made the following conceptual framework.
Figure 1. Research conceptual Framework
2.3 Hypothesis Development
2.3.1 Effect of Auditor Competence (X1) on Audit Quality (Y1)
Watkins et al. (2004) proved that auditor competence to find and eliminating material misstatement and
manipulation in financial statements affect on audit quality. Furthermore, Lee and Stone (1995) also proved that
competence and independence affect on audit quality. Perry (1984) also proved that there are four factors that
affecting audit quality namely budget scope, incompetent, critically evaluate the transaction, and not
independent. Incompetent and independent is the dominant factor affecting audit quality. Therefore, this study
hypothesis is:
H1: auditor competence has a positive effect on audit quality
2.3.2 Effect of Auditor Independence (X2) on Audit Quality (Y1)
Mojtahedzadeh and Aghaei (2005) proved that auditor independence is a decisive factor in public
accounting profession. Without independence, audit detection task to find material misstatement is questionable,
because bias reports have low effect on audit quality. Furthermore, Wooten (2003) proved that auditor
independence is an important factor to affects audit quality. Hussey and Lan (2001) also proved that an audit can
only be qualified if auditor become independent to report violations of agreement between principal and agent.
Therefore, this study hypothesis is:
H2: Auditor's independence has a positive effect on audit quality
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2.3.3 Audit Time Budget (X3) Moderate the Effect of Auditor Competence on Audit Quality (Y1)
Arnlod et al. (2000) proved that a strict time budget in auditing environmental will decline auditor
competence through narrowed scope; reduce certain audit procedures, reliance on evidence of lower quality, and
removal of some of audit procedures. Mann and Tan (1993) concluded that tight budget times often lead to high
stress for auditor which is characterized by a decline in thinking and assessment, the narrowing in election
perception, indecision, and incomplete and indiscriminate in seeking information which could reduce auditors
competence. Therefore, this study hypothesis is:
H3: Audit time budget strengthen effect of auditors competence on audit quality
2.3.4 Audit Time Budget (X3) Moderates Effect of Auditor Independence on Audit Quality (Y1)
Rigorous audit time budget arises from an imbalance between the task and time available that cause
stress to affects auditors professional ethics through attitude, intention, attention, and behavior of auditors
(DeZoort, 1998 and Braun, 2000). As a result, auditor independence decreases and it will increase risk that an
audit opinion is not right, so it can be detrimental to users of audited financial statements (McNair, 1991).
Meanwhile, Smith et al. (1997) proved that a tight time budget audits often lead to unintended negative effect on
independence that affecting audit quality. Therefore, this study hypothesis is:
H4: Budget time audit strengthen effect of auditor independence on audit quality
2.3.5 Professional Commitment (X4) Moderates Effect of Auditor Competence on Audit Quality (Y1)
Professional commitment is an important factor in an individual’s behavior within profession context.
Auditors with a high level of professional commitment tend more competent and independent in addressing
issues related to inter-role conflict and remain focused on job (Lui et al., 2001). While Yetmar (2005) proved
that high professional commitment is reflected in sensitivity to issues of professional ethics to raise competence
and independence of auditor. Therefore, this study hypothesis is:
H5: Professional commitment strengthen effect of auditor’s competence on audit quality
2.3.6 Audit Professional Commitment (X4) Moderates Effect of Auditor Independence on Audit Quality
(Y1)
Greenfield et al. (2007) proved that high professional commitment can become a factor to increase competence
and independence of auditor. Study results of Shaub et al. (1993) concluded that one important component of this
commitment is basis of professional standards and ethics are used as the basis for public accounting practice so can increase
auditor competence and independence in decision making. Therefore, this study hypothesis is:
H6: Audit professional commitment strengthens effect of auditor independence on audit quality
III. METHODS
3.1 Population and Sample
Population was a public accountant at accounting firm in Indonesia in 2012 which obtained a license from Minister
of Finance, not under leave condition, and other causes, with amount of 918 public accountants. Furthermore, samples are
selected randomly in reference to formula of Slovin Umar (2000:68) as many as 278 public accountants.
3.2 Data Types and Data Collection
This study uses primary data in form of a public accountant’s perception of auditor’s competence, auditor
independence, audit time budget, professional commitment, and audits quality. Data were collected through questionnaires.
Respondents is provided five qualitative alternative answers, then it be quantified by giving a score to each answer using a
Likert scale, from strongly agree (5) to strongly disagree (1) (Sekaran, 2006).
3.3 Data Analysis Techniques
Hypotheses 1 through 4 are tested by Partial Least Square (PLS) with following equation.
y1 = bo + b1x1 + b2x2 + b3x1*x3 + b4x2*x3 + b5x1*x4 + b6x2*x4 + e
where: y1 = audit quality
x1 = auditors competence
x2 = auditor independence
x3 = audit time budget
x4 = professional commitment
b1..... b6 = regression coefficient
e = other variables not included in model (confounding variables)
Response bias, validity, reliability, linearity, and goodness of fit models is tested before PLS analysis be done,
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IV. RESULTS
4.1 Data Collection Results
Data collection results through questionnaire delivery are presented in Table 1 below.
Table 1. Details of Shipping and Returns Questionnaire
No Questionnaire Delivery Sent Return (%)
1 Stage 1 278 64 (23%)
2 Stage 2 (repetition for not response at stage 1) 214 58 (27%)
3 Stage 3 (repetition for not response at stage 2) 156 56 (36%)
T o t a l 648 178 (27%)
Sources: Primary data processed
Table 1 shows that total of 648 questionnaires were sent and received 178 or 27 percent response. Thus, the
amount of data to be analyzed as many as 178.
4.2 Testing Results of Response Bias, Validity, reliability, linearity, and Goodness of Fit Model
Response bias test results by using Kolmogorov -Smirnov Z indicates that value of asymmetry
significance or p value of each variable greater alpha 5 %. These results indicate that there is no response bias.
Validity result using Pearson correlation test showed that p-value is smaller 0:05. These results indicate that
items in questionnaire are valid. Meanwhile, the results of the reliability test using Cronbach alpha indicates that
Cronbach alpha values exceeding 0.6. These results indicate that items in questionnaire revealed reliable.
linearity assumption test results using Curve Fit linear model indicates that significant for the fourth hypothesis
is smaller than 0.05 for all possible models. This result indicates the model is linear. Goodness of Fit model test
results using R2
value is 0.6873 or 68.73 percent. It indicates that data can explain information 68.73 percent by
model. The remaining 31.27 percent is explained by other variables (outside of model) and error. These results
say that PLS model is well formed. Thus, the model can be used for hypothesis testing.
4.3 Hypothesis Testing Results and Discussion
Hypothesis testing results using PLS are presented in Table 2 and Figure 2 below.
Table 2. Coefficient estimates, t-stat, and p-value of hypothesis tests
Relation
Estimation
coefficient
t-stat p-value
Auditor competence (x1) Audit quality (y1) 0.173 2.267 0.023
Auditor independence (x2) Audit quality (y1) 0.246 3.184 0.001
Audit time budget (x3) Audit quality (y1) 0.286 3.950 0.000
Professional commitment (x4) Audit quality (y1) 0.185 2.187 0.029
x1*x3 Audit quality (y1) -0.211 2.820 0.005
x1*x4 Audit quality (y1) 0.219 3.168 0.002
x2*x3 Audit quality (y1) -0.209 3.021 0.003
x2*x4 Audit quality (y1) 0.214 3.421 0.001
Sources: Primary data processed in 2012
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Figure 1. Diagram of Hypothesis Testing Results Using PLS
4.3.1 Effect of Auditor Competence (X1) on Audit Quality (Y1)
Hypothesis results in Table 2 above show that p-value of 0.023 is smaller and alpha 5 %, t-stat 2.267 is
greater1.96. Estimated value of coefficient 0.273 for inner weight is positive. This indicates a positive
relationship. It means the higher auditor's competence, the higher audit quality. Thus, first hypothesis which
states that auditor's competence has a positive effect on audit quality is accepted.
This study results are supported by research of Schroder et al. (1986) and Duff (2004) which proved
that attribute to determine audit quality is auditors competence. In addition, empirical data show that auditor’s
competence is formed by good audit planning, knowledge, experience, and supervision. This is indicated by
mean value of 4.0. Meanwhile, the PLS results showed that experience indicator show major effect on auditor
competence (first order) with outer weight 0.849, t-stat 3.128 > 1.96, 0.000 and p-value of <0.05. Therefore, the
experience is considered the most important indicators by respondents to form auditor's competence.
This argument is supported by Bouwman and Bradley (2004) that auditor experience is an important element in
inspection task. Experience can be gained from work. By doing the work, especially for repetitive tasks and
routines (such as auditing), auditor can get a chance to do a better job and can make better decisions as well. So,
will support competence. Furthermore, Tubbs (1992) states that subject with more audit experience will more
competent find more errors and mistakes items than auditor who has less experience. Furthermore, Simanjutak
(2005:88) stated that work experience can deepen and expand job competence. The more often a person doing
the same job, the more skilled and sooner he finished the job. The more work a person does, the more rich
experience and extensive work and enables to increase performance.
4.3.2 Effect of Auditor Independence (X1) on Audit Quality (Y1)
Hypothesis results in Table 2 above show that p-value of 0.001 is smaller than alpha of 0.05 and t-stat
3,184 is greater than 1.96. Estimated value of coefficient 0.346 for the inner weight is positive. This indicates a
positive relationship. It means the higher auditor independence, the higher audit quality. Therefore, second
hypothesis that auditor independence has a positive effect on audit quality is accepted.
This study results are supported by research Schroder et al. (1986), Deis and Giroux (1992), Warming
and Jensen (2001), Baotham and Ussahawanitchakit (2009), and Alexander et al. (2010) who state attributes that
determine audit quality with main focus on moral and ethical issues is auditor independence. In addition,
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empirical data indicate that auditor independence is formed by audit market competition, economic dependence,
non-audit services, and future assignments, said to be good. This is indicated by mean value of 4.0. Meanwhile,
the PLS results indicate that non-audit services indicator is an dominant indicator of auditor independence (first
order) with outer weight -0984, t-stat 4.184 > 1.96, 0.000 and p-value of <0.05. Therefore, the non-audit
services are considered the most important indicators by respondents to form auditor independence.
This argument is supported by Shockley (1981) that accounting firm that providing management consulting
services to clients who are audited can increase the risk to damage independence than those who do not provide
such services. Ruddock et al. (2006) also proved that existence of non-audit services can lead to loss of auditor’s
independence. It is because revenue is tied to client through a large reception which is not related to auditing
Low independence makes value of audit services would be no benefit and its opinion will not give any
additional value (Sweeney, 1995 and Mautz and Sharaf, 1993). In addition, DeAngelo (1981b) states that
auditor's independence is the courage to tell " the truth although the truth is bad news " from the perspective of
client. Furthermore, Cox (2000) suggested that auditor independence is very important to maintain confidence in
integrity of financial reporting and capital markets. Therefore, auditor is required to maintain its independence,
intellectual honesty, and free from interest conflicts (Marden and Edwards, 2002).
Therefore, independence should be viewed as one of most important characteristics of auditors. It is
reason why so many people loss who hang their confidence in fairness of financial reporting by auditor's report
is because they hope to get impartial opinions. Auditing standards stated that auditors should independent,
meaning not easily affected because he was carrying out work for public interest. Public trust will decline if
there is evidence that independence of auditor's attitude turned out to be reduced. Therefore, to be independent,
auditor must be objective to expresses the fact.
4.3.3 Audit Time Budget (X3) Moderate Effect of Auditor Competence (X1) on Audit Quality (Y1)
Hypothesis results in Table 2 above show that p-value of 0.005 is smaller alpha of 0.05 and t-stat 2.820
is greater than 1.96. Estimated value of the coefficient inner weight -0311 is negative. It indicates that negative
relationship. It means the smaller audit time budget, the greater effect of auditor’s competence on audit quality.
Thus, third hypothesis which states that audit time budget strengthens effect of auditor’s competence on audit
quality is rejected.
This study results are supported by resilience theory of Grotberg (1995), which states that resilience is
ability to confront and overcome the pressures of work or the pressures of life, grouped into four levels, namely
succumbing, survival, recovery and thriving.
Based on resilience theory of Grotberg (1995), the this study results indicate that respondent's ability to
confront and overcome audit time budget pressure at thriving level indicated that individuals are not only able to
return to function before and when there is pressure, but resilient individuals would be able to confront and cope
with stressful and challenging conditions, by bringing new capabilities that make individuals better. Individuals
at level thriving has the following characteristics : a quiet demeanor, emotional control, ability, clear vision, a
positive self-concept, commitment/responsibility to profession, experience, knowledge, desire to positive social
relationships, and faith quality.
In order auditor able to face and overcome tight audit time budget, they should be fast forward
(thriving) in resilience theory Grotberg (1995), the characteristics which have sufficient experience and
knowledge. In connection with experience and knowledge, empirical data show that 46 percent of respondents
have experience more than 7 years and 47 percent have been audited as much as 4 times a year. Furthermore, 51
percent of respondent’s knowledge and skills that related to their professional knowledge are exceeding 24 SKP.
Trotman and Wright (1996) states that work experience can deepen and extend workability. The more often a
person doing the same job, the more skilled and sooner he finished the job. The more kinds of work a person
does, the more rich and extensive work experience that enables increased performance. Furthermore, Libby and
Frederick (1995) suggested that knowledge is information stored in memory that important for auditor, because
when the environment audit changes, auditor needs to improve knowledge of best practices to make judgments
This study results demonstrate that the smaller audit time budget, the greater effect of auditor’s competence on
audit quality. It is not necessarily that the smaller audit time budget, the greater effect of auditor’s competence
on audit quality. It is reminded by McNair (1991) that audit should be set with a time budget and a standard
audit fee. Generally, auditors tend to establish not standards n audit fee. Fees that not appropriate with auditing
standards will lead to shorter budget time and not measured accurately. PLS results indicate that time limit
indicator is an indicator that reflects the large audit time budget (first order) with outer loading 0.869, t-stat
3.316 > 1.96, 0.001 and p-value of <0.05. Therefore, the deadline is considered most important indicators by
respondents to reflect audit time budget.
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This argument is supported by Eden (1982) that deadline is temporary time pressure which brings
effect on high intensity. Pressure time at this moment looks more dangerous than time budget pressure. It
deadline can makes auditors are required to complete a job immediately before the time/date specified. DeZoort
(1998) states that deadline can be derived from the firm, clients, and third parties such as regulators. Deadline
can appear suddenly (unexpectedly), so it create additional stress for auditor and unpredictable nature makes
auditor more difficult to manage.
4.3.4 Audit Time Budget (X3) Moderate Effect of Auditor Independence (X2) on Audit Quality (Y1)
Hypothesis results in Table 2 above show that p-value of 0.003 is smaller than alpha of 0.05 and t-stat
3,021 is greater than 1.96. Estimated value of coefficient inner weight -0309 is negative. It indicates negative
relationship (weaken). It means the smaller audit time budget, the greater effect of auditor independence on
audit quality. Thus, the fourth hypothesis which states that audit time budget strengthens effect of auditor
independence on audit quality is rejected.
This study results are supported by resilience theory of Grotberg (1995), namely one's ability to
confront and overcome work or life pressures are grouped into four levels, namely level of succumbing,
survival, recovery and thriving.
Based on resilience theory of Grotberg (1995), the this study results indicate that respondent's ability to
confront and overcome audit time budget pressure at thriving level indicated that individuals are not only able to
return to function before and when there is pressure, but resilient individuals would be able to confront and cope
with stressful and challenging conditions, by bringing new capabilities that make individuals better. Individuals
at level thriving has the following characteristics : a quiet demeanor, emotional control, ability, clear vision, a
positive self-concept, commitment/responsibility to profession, experience, knowledge, desire to positive social
relationships, and faith quality.
In relation with commitment to profession, Jeffrey et al. (1995) proved that accountants with high
professional commitment considers important to adherence to standards and ethics to the improvement of moral
development and ethics encourage sustainable development to increase their independence. So, in order that
auditor able to face and overcome tight time budget audit, they must at advanced level rapidly (thriving) in
resilience theory Grotberg (1995), the characteristics which have a high commitment to profession.
In addition, Waggoner and Cashell (1991) warned that to loose audit time budget can make auditors are
not motivated to work harder. Adversely, too tight audit time budget can lead to counter-productive behavior. It
is caused by presence of neglected tasks. The same thing also expressed by Kelly and Margheim (1990) that
tight time budget can affect the auditor’s behavior, which failed to examine the principles of accounting,
document review superficially, the client receives a weak explanation, and reduce work quality on one step
below level of audit accepted. Therefore, according to Braun (2000) it would impair auditor independence
through a reduction in level of detection and investigation.
Sososutikno (2003) states that a tight audit time budget makes auditor is required to show the
efficiency of the budget period prepared. For accounting firm, rigorous audit time budget is a condition that can
not be avoided in face of competition climate. Accounting company should be able to make a proper audit time
budget. Too long audit time budget create greater audit costs, so client will bear greater cost of audit. This could
be counterproductive if clients choose more competitive accounting firm. Therefore, audit time budget should
be realistic, not too long or too fast.
Audit time budget is necessary for auditors to perform their duties in order to meet client demand in a
timely manner and be one key to success in future auditors careers. Therefore, criteria to get a good ranking are
the achievement of budget time (Kelley and Seiler, 1982). In addition, audit time budget used as a tool for
planning and control are best way for firm make focused and comprehensive audit (Cook and Kelley, 1991).
4.3.5 Professional Commitment (X4) Moderate Effect of Auditor Competence (X2) on Audit Quality (Y1)
Hypothesis results in Table 2 above show that p-value 0.002 is smaller than alpha 0.05 and t-stat 3.168
is greater than 1.96. Estimated coefficient value of inner weight 0.219 is positive. It indicates positive
relationship (strengthening). It means, the stronger professional commitment, the greater effect of auditor’s
competence on audit quality. Thus, the fifth hypothesis which states that commitment strengthens effect of
professional auditor’s competence on audit quality is accepted.
This study results are supported by research of Jeffrey and Weatherholt (1996) that auditors with high
professional commitment behavior is more directed to obey rules than auditors with low professional
commitment, thus increasing competence and independence. Gunz and Gunz (1994) proved that to become a
true professional, one must have a high professional commitment to invest a lot of time and energy in learning
and practicing the knowledge and professional skills. Therefore, knowledge and skills are professionalism
foundation that can improve their professional competence.
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Professional commitment to research is reflected by normative, continuous and affective professional
commitment. Normative professional commitment demonstrates indicators that reflect the major (first order) of
professional commitments. This indicates that normative professional commitments are considered most
important by respondents.
4.3.6 Professional Commitment (X4) Moderation Effect of Auditor Independence (X2) on Audit Quality
(Y1)
Hypothesis results in Table 2 above show that p-value 0.0012 is smaller alpha 0.05 and t-stat 3,421 is
greater than 1.96. Estimated coefficient value of inner weight of 0.219 is positive. It indicates positive
relationship (strengthening). It means the stronger professional commitment, the greater auditor independence
effect on audit quality. Thus, sixth hypothesis which states that professional commitment strengthens effect of
auditor independence on audit quality is accepted.
This study results are supported by research of Jeffrey et al. (1995) who concluded that accountants
with high professional commitment very concern to adherence and ethics that affecting to improve moral
development and supporting sustainable ethics development, thereby increasing independency. Lampe and Finn
(1991) in his study concluded that auditor ethics development reflects ethical and standards compliance. Auditor
ethics development level is a function of their orientation to meet standards and ethics related to professional
commitment to improve auditor independence.
V. CONCLUSIONS, IMPLICATIONS, LIMITATIONS AND SUGGESTIONS
5.1 Conclusion
First, auditor’s competence has positive effect on audit quality. It means the higher auditor's
competence, the higher audit quality. Second, auditor independence has a positive effect on audit quality. It
means the higher auditor independence, the higher audit quality. Third, audit time budget weaken effect of
auditors competence on audit quality. It means the smaller audit time budget, the greater effect of auditor’s
competence on audit quality. Fourth, audit time budget weaken effect of auditor independence on audit quality.
It means the smaller audit time budget, the greater effect of auditor independence on audit quality. Fifth,
professional commitment strengthens effect of auditor’s competence on audit quality. It means the stronger
professional commitment, the greater effect of auditor’s competence on audit quality. Sixth, professional
commitment strengthens effect of auditor independence on audit quality. It means the stronger professional
commitment, the greater effect of auditor independence on audit quality.
5.2 Implications
First implications are for auditor independence. Public accountant, in an effort to improve their
competence, should consider auditors competence creation, including planning, knowledge, experience, and
supervision. Auditor experience should be gained attention in effort to drive auditor’s competence. Therefore,
empirical data show that auditors experience is dominant to improve auditor competence greater than other
indicators.
Second implications are for auditor independence. Public accountant, in an effort to increase its
independence, should pay attention to indicators of auditor’s independence, namely audit market competition,
economic dependence, non-audit services, and future auditor assignments. Non-audit services should more
concern to improve auditor independence. Empirical data show that non-audit services shows greater effect than
other indicators on auditor independence.
Third implications are for audit time budget. Auditing should set standard time budget and audit fees as
well. Inappropriate auditing standards fee will lead to shorter budget time and not measured accurately. While
longer audit time budget can make auditors are not motivated to work harder.
Fourth implications are for professional commitments. Auditors, in an effort to improve his
professional commitments, should pay attention to indicators that reflect professional commitment, namely
normative, continuous and affective professional commitment. Normative professional commitment is the
biggest indicator to reflect professional commitment than other indicators.
5.3 Limitations and Suggestions
Researchers did not differentiate between large (big four) and small (non big four) accounting firm as
population and study sample. Therefore, reader should be cautious in generalizing this study results. Further
research should consider typology of accounting firm, ie large (big four) and a small (non big four) auditing firm
as population and study sample. Kelley and Seiler (1982) warned that typology distinction is important, because
it will affect on level of audit time budget pressures and perceived behavior of auditors in audit. Auditor at a
certain level has interest to receive an evaluation of their performance and one of the important factors for good
performance evaluation is achievement of audit time budget.
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